Much of the improvement in confidence can be attributed to the resiliency of the economy post-Katrina and the recent declines in fuel prices.

While the economy has not turned around yet, the worst may well be over. The upturn in confidence is being driven by growing confidence about the business outlook and job prospects. Consumer expectations for the future are now higher than they have been in more than a year.

Historically, shocks have had a short-term impact on consumer confidence, especially on consumers' expectations. Fuel prices remain high, though they have retreated in recent days, and when combined with a weaker job market outlook, will likely curb both confidence and spending for the short run.

Much of the decline in confidence over the past two months can be attributed to the recent hurricanes, (gas) pump shock and a weakening labor market.

The improvement in consumers' mood suggests that business activity and labor market activity will continue to pick up over the next several months.

As rebuilding efforts take hold and job growth gains momentum, consumers' confidence should rebound and return to more positive levels by year-end or early 2006.